02 - Commercial Banks and Non Banks

  1. Asset Management
    A bank restricts growth in its lending to the level of funds available from its deposit base.
  2. Liability Management
    A bank actively manages its sources of funds (liabilities) in order to meet future loan demand (assets).
  3. Off-balance-sheet Business
    Transactions that represent a contingent liability and therefore are not recorded on the balance sheet.
  4. Current Account Deposits
    Liquid funds held in a cheque account.

    Cheques drawn to purchase goods and services.
  5. Call Deposits
    Funds held in a savings account that can be withdrawn on demand.
  6. Term Deposits
    Funds lodged in an account for a predetermined period and at a specified fixed interest rate.
  7. Certificate of Deposit (CD)
    Short-term discount security issued by a bank.

    Face value repayable at maturity.
  8. Negotiable Security
    Financial instrument that can easily be sold into a deep and liquid secondary market.
  9. Bill of Exchange
    Short-term money-market discount security.

    Face value payable at maturity.
  10. Acceptance
    A bank puts its name on a bill issued by a third party.

    Bank accepts primary liability to repay the face value at maturity.
  11. Debenture
    Form of security attached to a corporate bond.

    A fixed and/or floating charge over the assets of the issuer.
  12. Unsecured Note
    Corporate bond issued without any forms of underlying security attached.
  13. Collateralised Floating Charge
    Security attached to a loan.

    If borrower defaults, the lender will take possession of the borrower's assets.
  14. Foreign Currency Liabilities
    Debt instruments issued into the international capital markets that are denominated in another currency.
  15. Euromarkets
    Debt markets where instruments are issued into another country, but not denominated in the currency of that country.
  16. Loan Capital
    Sources of funds that have the characteristics of both debt and equity.
  17. Housing Finance
    The provision of long-term funds to enable the purchase of residential property.
  18. Mortgage
    Form of security whereby a lender registers an interest over the title of a property.
  19. Mortgage Originators
    Specialist mortgage lenders that typically refinance their lending through securitisation.
  20. Amortised Loan Instalments
    Regular and equal loan instalments that comprise the current interest payment due, plus part payment of the loan principle outstanding.
  21. Investment Property Finance
    Funding that enables a borrower to purchase property to rent or lease.
  22. Fixed-term Loan
    Loan provided for a predetermined period.

    Used to purchase goods or services.
  23. Credit Card
    Card facility that provides access to funds through electronic systems (EFTPOS, ATM).
  24. Reference Interest Rate
    Benchmark interest rate published daily and used for pricing variable-rate loans.
  25. Bank Bill Swap Rate (BBSW)
    The average mid-point of banks' bid and offer rates in the bank bill secondary market.
  26. Commercial Bill
    Bill of exchange issued direct to raise finance for a business.

    Discount security.

    May be sold into the money market.
  27. Bank Bills Held
    Bills that have been accepted and discounted by a bank and are held as a balance-sheet asset.
  28. Rollover Facility
    Bank agrees to discount new bills over a specified period as existing bills mature.
  29. Lease
    The owner of an asset (lessor) allows a lessee to use the asset in return for periodic lease payments.
  30. Direct Credit Substitute
    An undertaking provided by a bank to support the financial obligations of a client.
  31. Trade-and-performance Related Item
    Undertaking provided by a bank to a third party promising payment under the terms of a specified commercial contract.
  32. Commitments
    Contractual financial obligations of a bank that are yet to be completed or delivered.
  33. Market-rate-related Contracts
    Derivative products.

    Allow management of exposures to interest rate, foreign exchange, equity and commodity price risks.
  34. Hedging
    Implementing strategies to protect against an identified risk exposure.
  35. Bank Regulation
    Constraints on banking activities through prescriptive legislation and prudential supervision.
  36. Prudential Supervision
    The imposition and monitoring of standards designed to ensure the soundness and stability of a financial system.
  37. Authorised Deposit-taking Institutions
    Financial institutions authorised by the APRA to accept retail deposits in Australia.
  38. G-10
    • Belgium
    • Canada
    • France
    • Germany
    • Italy
    • Japan
    • Netherlands
    • Sweden
    • UK
    • USA
  39. Basel II Capital Accord
    The standard that defines the minimum capital adequacy requirement for a bank.
  40. Basel III Capital Accord
    An enhanced set of capital, leverage and liquidity standards.
  41. Market Risk
    The exposure of a bank's trading book to changes in interest rates and exchange rates.
  42. Tier 1 Capital
    Highest quality.

    Core capital for capital adequacy purposes.
  43. Tier 2 Capital (Upper)
    Specified acceptable capital adequacy instruments, including hybrids, of a permanent nature.
  44. Tier 2 Capital (Lower)
    Specified acceptable capital adequacy instruments that are not permanent.
  45. Pillar 1
    Incorporates components of credit risk, operational risk and market risk within the Basal II capital accord.
  46. Standardised Approach to Credit Risk
    Provides risk weights to be applied to balance-sheet assets and off-balance-sheet items to calculate the minimum capital requirement.
  47. Current Exposure Method
    Off-balance-sheet capital calculation based on the current and potential credit exposures mark-to-market.
  48. Original Exposure Method
    Off-balance-sheet capital calculation based on the notional contract value multiplied by a credit conversion factor.
  49. Mark-to-market
    The revaluation of a contract based on its current quoted price on an exchange.
  50. Internal Ratings-based Approach to Credit Risk
    For capital calculations a bank may use some or all of its own risk measurement model factor.

    Supervisor approval required.
  51. Operational Risks
    Exposures that may impact on the normal day-to-day business functions of an organisation.
  52. Business Continuity Management
    Maintenance strategies to ensure the continuance of critical business functions.
  53. General Market Risk
    For capital adequacy purposes.

    Changes in the overall market for interest rates, equities, foreign exchange and commodities.
  54. Specific Market Risk
    The risk that the value of a security will change due to issuer-specific factors.
  55. Value at Risk (VaR)
    Statistical probability model that measures financial risk exposures based on historic observations.
  56. Basis Points
    Interest rates.

    100 basis points = 1%
  57. Securities Portfolio
    Financial securities held by an institution for investment and trading purposes.
  58. Liquidity Management
    Organisation's objectives, policies and procedures as they relate to cash flows and liquidity.
  59. Contingency Plan
    Set of predetermined strategies to be implemented if a designated event occurs.
  60. Non-executive Board Members
    Board members who are not part of the management of a corporation or its subsidiaries.
  61. Front Office
    Involves client relations.

    • Trading
    • Investment banking
    • Research and investment management.
  62. Middle Office
    Do not involve client relations but may complement or monitor front office activities.

    • Risk measurement
    • Reporting
  63. Back Office
    Most removed from client relations.

    • Accounting
    • Compliance
  64. Investment Banks
    Specialist providers of financial advisory services to corporations, high-net-worth individuals and government.
  65. Underwriter
    An institution that supports the issue of securities by a client and agrees to buy any securities not bought by investors.
  66. Merger and Acquisition
    Takeover company seeking to gain control over a target company.
  67. Spin-off
    A situation where a part of a company is separated from the whole and begins an existence as an independent company.
  68. Horizontal Takeover
    Two companies involved in an acquisition and merger are in the same business.
  69. Vertical Takeover
    The target company in a merger and acquisition operates in a business related to the takeover company.
  70. Conglomerate Takeover
    The business of a merger and acquisition target company is unrelated to the existing business of the takeover company.
  71. Hostile Takeover
    The target company rejects the merger and acquisition proposal of the takeover company.
  72. Managed Funds
    Pooled savings of individuals are invested.
  73. Mutual Funds
    Managed funds that are established under a corporate structure.

    Investors purchase shares in the fund.
  74. Trust Fund
    Managed funds established under a trust deed.

    Managed by a trustee or responsible equity.
  75. Trust Deed
    Document detailing the sources, uses and disbursement of funds in a trust.
  76. Responsible Entity
    The trustee and manager of a trust fund in Australia.
  77. Capital Guaranteed Fund
    Fund that offers the potential of positive returns while putting in place strategies to protect investors' capital from downside losses.
  78. Capital Stable Fund
    Capital invested exhibits low variability because the fund invests mainly in low-risk securities.
  79. Balanced Growth Fund
    Investments target longer-term income streams supported by limited capital growth.
  80. Managed Growth Fund
    Invests to obtain greater return through capital growth.

    Lower income streams.
  81. Cash Management Trust (CMT)
    Invests the accumulated savings of individuals mainly in wholesale money-market securities.
  82. Public Unit Trust
    Investors purchase units in a trust.

    The pooled funds are invested in asset classes specified in the trust deed.
  83. Property Trust
    Invests in different types of property specified in the trust deed (industrial, retail).
  84. Equity Trust
    Invests in different types of shares listed on stock exchanges.
  85. Mortgage Trust
    Invests in mortgages registered as loan securities over land.
  86. Fixed-interest Trust
    Invests in a range of debt securities such as government and corporate bonds.
  87. Listed Tust
    The units of a trust are listed and traded on a stock exchange.
  88. Unlisted Trust
    To sell units, a unit holder must sell them back to the trustee after giving the required notice.
  89. Superannuation
    Savings accumulated by an individual to fund their retirement from the workforce.
  90. Age Pension
    A limited regular income stream paid by a government to older retired persons.
  91. Corporate Superannuation Fund
    An employer contributes to a fund established for the benefit of an employee.

    Employee may also contribute.
  92. Industry Super Fund
    Similar to corporate, but fund is established for all employees in a specific industry.
  93. Public Sector Superannuation Fund
    A government-sponsored fund established for the benefit of government employees.
  94. Superannuation Guarantee (SCG)
    The compulsory superannuation scheme operating in Australia
  95. Rollover Fund
    Holds existing eligible termination payments within the regulated superannuation environment.
  96. Eligible Termination Payment (ETP)
    Superannuation funds due on termination of employment plus related redundancy payments.
  97. Defined Benefit Fund
    The amount of superannuation paid to an employee on retirement is based on a defined formula.
  98. Accumulation Fund
    The amount of superannuation funds available at retirement consist of past contributions plus earnings, less taxes and expenses.
  99. Premium
    The amount paid by the buyer of a contract (insurance policy, option).
  100. Policyholder
    The person who takes out an insurance policy that covers a defined risk event.
  101. Beneficiary
    The party who is entitled to receive payment under the terms of an insurance policy.
  102. Whole-of-life Policy
    Life insurance policy that incorporates a risk component and an investment component.

    Accumulates bonuses and a surrender value.
  103. Investment Component
    Allows periodic bonuses to accumulate as a whole-of-life insurance policy.
  104. Risk Component
    The cost of the actual life insurance cover as determined by an actuary.
  105. Term-life Policy
    Life insurance covers for a fixed amount and a predetermined period.
  106. Total and Permanent Disability Insurance
    Insurance policy covering loss of limes or total inability to resume an occupation.
  107. Trauma Insurance
    A lump-sum payment made if a specified event occurs (stroke).
  108. Income Protection Insurance
    Payment of a limited income stream if the insured is unable to work in the event of illness or accident.
  109. Business Overheads Insurance
    Coverage of specified day-to-day operating expenses in the event of a disruption.
  110. Co-insurance Clause
    If an asset is under-insured the policy will cover only the proportional value insured.
  111. Public Liability Insurance
    Covers injury or death of a third party due to negligence of a property owner or occupier.
  112. Comprehensive Insurance
    Policy covers damage to the insured vehicle, plus third party vehicle or property damage.
  113. Third Party, Fire and Theft Policy
    Policy covers only fire or theft of the insured vehicle, plus third party vehicle or property damage.
  114. Compulsory Third Party Insurance
    Covers a legal liability for bodily injury resulting from a motor vehicle accident.
  115. Hedge Funds
    Invest in exotic financial products mainly for high-net-worth individuals and institutional investors.
  116. Building Societies
    Authorised deposit-taking institutions that primarily give loans to customers to buy residential property.
  117. Authorised Deposit-takining Institution (ADI)
    Financial institution authorised by APRA to accept retail deposits in Australia.
  118. Credit Unions
    Authorised deposit-taking institutions that accept retail deposits and provide loans to members.
  119. Common Bond of Association
    Members are drawn together from a common background of work, industry or community.
  120. Export Finance Corporations
    Government authorities that provide finance and insurance support and services to exporters.
Card Set
02 - Commercial Banks and Non Banks
230 - Commercial Banks and Non Banks